Five Key Reasons for Extreme Volatility in 2018

10:36 11/05/2018

2018 has been one of the most volatile on record. In January 2018, the Dow Jones sank from a high of 26,616 to a low of 23,360, only to rebound and plunge again. Then it rallied to an all-time high of 26,951 before plunging to 24,122. We saw similar volatility in the tech-heavy NASDAQ, the S&P 500, and Russell 2000. All thanks to a mountain of worry. Some believe the Federal Reserve made a mistake raising rates, which could make borrowing much more expensive. Earnings growth may be slowing. U.S. sanctions on Iran are again in place. And then of course, the trade war between China and the U.S. hasn’t been well received. However, the biggest culprit has been the fear of midterm elections. There’s uncertainty on whether or not Congress will change hands. In fact, there was growing fear that if the Democrats won the midterm elections, we’d see a quick rollback of regulations and of the well-received tax cut for both companies and individuals. That – many feared – would put an immediate halt to economic progress. Of course, such uncertainty has created obscene fear in the market. Many investors panicked and sold quality stocks simply out of fear. However, that’s the worst thing you can do. The very best thing to do in a pullback is to wait out the panic, and hold for the resiliency rally. We also have to remember that we’re in the middle of exceptional economic growth. Over the past week, the U.S. GDP came in better than expected at 3.5%. Then, the Bureau of Labor Statistics reported another 250,000 jobs in October 2018. That was much better than projections for just 190,000, as we reported the other day. "The job market is doing remarkably well, particularly this late in the expansion," said Jim Baird, partner and chief investment officer for Plante Moran Financial Advisors, as quoted by CNBC. "This report adds yet another data point to a narrative that has been positive for the labor market this year. Little seems to stand in the way of the economy finishing 2018 out on solid footing." Volatility will come and go. Just don’t let it chase you out of the market.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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